VAT Compliance in Taiwan for 2Checkout Merchants

4 minutes

At 2Checkout, we’re continuously working towards maintaining compliance with national regulations. Here is an update on Taiwan.

New VAT procedures

Taiwan’s new VAT tax ruling came in effect at the start of this year, requiring all non-resident online sellers who provide digital services to Taiwanese consumers to issue Cloud Government Uniform Invoices (GUI or eGUI), starting January 1, 2020. The documents released are a form of government-approved e-invoices, which are periodically entered by the Taiwanese state into national invoice lotteries.

The new tax ruling, No. 106005495201, called for all foreign companies without a fixed residence in Taiwan to start issuing these uniform invoices as of January 2019. Ultimately, a one-year probation was offered by the Ministry of Finance (MoF) in the country, delaying until 2020 the obligation to implement these e-invoices, so that merchants could have time to set up their financial solutions.

The VAT Act and Tax Collection Act applies to B2C companies without a fixed place of business in the country (known as foreign eCommerce operators or FECOs) who sell digital or electronic goods to Taiwanese residents and whose annual sales exceed TWD 480,000 (about $16,000). Digital or electronic services are described as: desktop or mobile apps, eBooks, streaming or download media, online learning and journals, SaaS and site memberships, and so on.

Scope of law and how it works

This new development continues the country’s efforts in the past years to encourage compliance in sales, even among offshore eCommerce suppliers.

In order to boost Taiwan’s sales intake and get customers to request invoices when purchasing from merchants, the National Taxation Bureau of Taipei, Ministry of Finance (NTBT) has been running invoice lottery systems ever since the 1950s. In the mid-2000s, the NTBT introduced e-invoicing (Cloud Government Uniform Invoices, aka GUIs), as a means to optimize the billing process. Even more recently, in 2017, Taiwan started requiring foreign e-service suppliers to account for VAT (5%) in B2C transactions, although the requirement to issue e-invoices was made voluntary as of January 1, 2019, so that offshore suppliers could have time to prepare.

Taiwan VAT
Taiwan has been making efforts in recent years to optimize sale compliance and taxation.

Today, issuing GUIs has just become mandatory for foreign businesses whose annual sales exceed TWD 480,000. Failure to comply with the VAT Act and Tax Collection Act is now considered a violation of the law, as prescribed by Articles 51 and 52, punishable with penalties of up to five times the amount of VAT that should have been invoiced. Even more in terms of penalties, three invoice reporting failures within a 12-month period can result in termination of the FECO’s business in Taiwan.

The NTBT has provided a list of approximately 30 potential third party systems that can help businesses with no residence in the country to integrate with the eGUI system. FECOs that want to sell digital goods in Taiwan have to use these systems to integrate with the e-invoice system, so that they can issue a separate invoice for each sale of digital goods. The separate documents contain a unique identification number and each sale must be reported within 48 hours of the transaction, with the appropriate number logged into the MoF’s systems.

How does 2Checkout help

Compliance with VAT regulations may seem like a long-term, resource-intensive project, but it doesn’t have to be if you are working with an experienced partner. As a 2Checkout merchant, working in a Merchant of Record model (MoR) with us, you benefit from full compliance with Taiwan’s VAT Act and Tax Collection Act, as we have partnered with a third-party provider integrated with Taiwan’s tax authorities’ system, and can maintain your activities in this market in full compliance.

2Checkout is registered as a taxpayer in Taiwan and we collect 5% VAT for B2C orders, with automatic exemptions in all our ordering engines (API, Legacy Cart, Convert Plus, Inline Cart) if a valid VAT is added. Merchants who use our 2Monetize service have this feature automatically applied to all orders addressed to Taiwan, without any additional costs.  

All Taiwan shoppers buying in 2Checkout flows now receive two invoices for each purchase, starting January 1, 2020: the standard invoice, issued by us, and, within 48 hours of purchase, the eGUI, issued by our third-party local provider. Shopper email billing addresses are reported by us to the Taiwanese Government, as the new regulation provides.

Taiwan government’s e-invoice platform
The government’s e-invoice platform has detailed information on tax collection and e-invoice lotteries.

Cloud GUIs can be checked by shoppers directly on the MoF’s e-invoice platform or through the government’s official Claiming Rewards app.

2Checkout merchant benefits

As a 2Checkout merchant, you benefit from full compliance with the VAT Act and Tax Collection Act, without having to perform any extra procedures. Inspire trust in potential shoppers by communicating your alignment with the most recent regulations on the Taiwanese market, and stay clear of the fines and penalties imposed locally for merchants who don’t comply.

Your end users have the extra benefit of participating in the NTBT’s bi-monthly invoice lottery whenever they purchase from you – the e-invoice provided by the 2Checkout platform and our local partner allows them to enter the lottery and have a chance at extra winnings.

Discover the benefits that come from working with 2Checkout in a Merchant of Record (MoR) model.

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